India To Revise GDP Calculation Methodology, New Series Due This Week

India is set to revise how it calculates real gross domestic product growth under a new national accounts series. The revised methodology will be launched later this week.

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Real GDP is measured by adjusting nominal output for inflation. The current approach relies heavily on wholesale price indices to deflate output. Economists have raised concerns that this method does not adequately reflect consumption-side inflation trends.

The revised framework will incorporate a broader set of price indicators. It will draw from both the consumer price index and the wholesale price index.

Use Of Expanded Price Basket

India will now use between 500 and 600 price items to deflate output. This compares with around 180 items used under the earlier methodology.

The revised basket will include items from the new CPI series and the older WPI series.

The approach will remain in place until a revised wholesale price index series is released, according to a Reuters report.

Saurabh Garg, Secretary in the Ministry of Statistics and Programme Implementation, said the changes are aimed at improving data accuracy. He said the updated method would address discrepancies observed under the earlier framework.

Addressing Earlier Concerns

Under the previous system, low nominal GDP growth combined with low wholesale inflation often translated into higher real growth rates. This raised questions about the reliability of real growth estimates, particularly during periods of divergence between wholesale and consumer prices.

Economists had flagged that the methodology relied more on wholesale inflation despite consumer inflation being more closely tracked. The revised approach is intended to correct this imbalance.

GDP Growth Estimates

Under the existing series, India’s economy is estimated to grow 7.4% in 2025/26. This compares with growth of 6.5% in 2024/25.

Nominal GDP is estimated to expand 8.0% in the current financial year. These figures are based on the older base year framework.

A new GDP series with a 2022/23 base year will be released on February 27. The release will include back-series data for the previous four years.

Broader Statistical Revamp

The GDP revision forms part of a wider overhaul of India’s statistical framework. Earlier this month, the government released a revised retail inflation series.

Revisions to wholesale inflation data and industrial output statistics are also under way. The changes are intended to modernise data collection and improve consistency across indicators.
In November, the International Monetary Fund raised concerns over weaknesses in India’s national accounts methodology. The IMF cited the outdated 2011/12 base year and reliance on wholesale prices.

It also flagged the extensive use of single deflation. The IMF assigned India’s national accounts framework a “C” rating.

Shift To Double Deflation

A key feature of the overhaul is the move towards double deflation. This method separately adjusts output prices and input costs.

The approach is designed to better measure real value added. It is expected to improve accuracy in manufacturing data.

Manufacturing has been a key area of concern due to divergence between input and output prices. The revised methodology is intended to address potential bias observed under the earlier single-deflation approach.